It should be noted that stability is not liquidity. When the balance of relative value of equities to bond yields is threatened by rising interest rates, the lack of liquidity produces violent volatility. We do not believe interest rates are going up but rather believe they are gravitating to their equilibrium rate of 0%. Consequently, we like US bonds over global bonds and like US equities over global equities. As for the US$, just the threat of Fed tightening is destabilizing so the Fed will need to begin to unwind their balance sheet to support the US$.
As we wrote in our last email before the European Central Bank press conference last Thursday,
Because of the asymmetric effect of monetary policy at near-zero, we also do not believe the Fed will tighten but rather will wait for economic growth and inflation to strengthen. The Phillips curve is no longer relevant in the global 21st century economy for predicting inflation but rather it is the natural scarcity of excess bank reserves. When the Fed uses its $4 trillion balance sheet to pay interest on the excess bank reserves - to push fed funds above their equilibrium of 0% - the Fed is artificially pushing interest rates higher rather than waiting for the economy to naturally utilize all excess bank reserves. Therefore, we expect fed funds to move lower and the yield curve to widen.
On Thursday, September 8th we sold the S&P at an equivalent index price of 2181.50, but that same day we bought back the position at 2181.50 and scratched the trade. On Friday September 9th, we bought the S&P at equivalent index price 2155.25 and closed out the position the same day at 2132 for a loss. Today, September 12th, early morning we bought the S&P at equivalent price of 2115. Currently, we are long the $Yen and the S&P and short the Japanese Nikkei and German 10yr bund and hedged in a synthetic option in the Euro$.
In 2012 modeled performance (7 ˝ mo.) net of all fees was +12.46% with a 10% Hurdle rate
In 2013, modeled performance net of all fees was +19.73% with a 10% Hurdle rate
In 2014, modeled performance net of all fees was +56.42% with a 10% Hurdle rate
In 2015, modeled performance net of all fees is +72.68% with an 8% Hurdle rate
In 2016, modeled performance net of all fees is +34.71% with a Graduated 10% Hurdle Rate
The Unicorn Macro Fund, LP (“Fund”) operates under the SEC rules of 506(c) of Regulation D. This rule allows general solicitation as long as all purchasers of the Fund are accredited investors and the Fund takes reasonable steps to verify that purchasers are accredited investors. The 506(c) rule benefits funds that perform better than their peers, because for the first time, Regulation D funds can post their results publicly.
The Fund trades both long and short positions in a variety of global markets and its performance is not correlated to any one market. Performance of the model of the Fund is measured by Net Asset Value (NAV) which is net of all fees, is unaudited, and may include the use of estimates. Individual results will vary based on the timing of an investment and past performance is no guarantee of future results and there is a possibility of loss.
The modeled results are based only on capital appreciation from macro style trades. The results do not include dividend reinvestment or any other form of cash flow and are taxed as ordinary income. All trades have a risk/reward objective of at least 3 to 1 and each full position risks no more than 2% of assets. There will be times when market conditions may alter these objectives. Since the inception of the model our trading of the methodology has become more precise.